Wealth Taxes...an intelligent discussion

[ha_banos]

5 hours ago, Montezüma said:

I just wanna share the current outrage caused by the new bill passed by the Netherlands government, called the Box 3 or Actual Return Act or Unrealized Gains Tax. In muggle terms this translates to paying tax on unsold (unrealized) capital gains. The prospect of this tax is ground-breaking because what the world has been accustomed to as paying on actual earnings (i.e. paying with liquid assets that a citizen has earned) is no longer sufficient. The lengths that states have gone to fulfill their agenda is bizarre. Because this tax is paying with what you allegedly possess instead of what you have truly earned. If this becomes the norm, then it becomes common practice for other states to implement.

Has this not already been scrapped? 

https://www.news.com.au/finance/money/tax/dutch-government-forced-to-backflip-on-taxing-unrealised-capital-gains/news-story/36523ff537e11695a81059e03d7086bb

[RedLantern]

15 hours ago, rcarlson said:

Estate/wealth tax = more creative estate planning, asset management, and accounting trickeration. It results in capital flight and stifles capital reinvestment. and produces no revenue of significance. There is no evil in capital concentration unless it somehow takes away from others, which it does not. 

Perceived income inequality is just a feature of capitalism. So long as standards of living increase (which they have in the U.S. to a remarkable degree), I can't fathom why wealth tax makes sense other than to placate the gauzy, superficial assertion that somehow someone else isn't "paying their fair share" (whatever that means). 

The whole concept is political, not economic.    

The concept of wealth inequality being bad is sociological, in my opinion, not political. And when you add in the prospect of wealth inequality being largely hereditary (as in the case of a perpetual or long-term trust), it's not just a sociological issue, but it becomes somewhat of a moral issue.

[RedLantern]

14 hours ago, REesq said:

There is already a wealth tax in place, it’s called inheritance tax. So between, income tax, a new “wealth” tax and the inheritance tax, the government would be taxing the same money three times.If I could only figure out how to get paid for the same work three times I wouldn’t object. Moreover, taking the longer view, no matter how great the fortune is, within a few generations it’s pretty much gone. The genius that created the wealth rarely moves down the generational food chain very far before entitlement and laziness kick in and deplete the fortune. 

I think this would largely be true, if we did away, or brought back meaningful restrictions on trusts. Perpetual institutional control of money shields it from the spendthrifts, idiots, and ne'er do wells that would otherwise eventually be sure to divest themselves of the lion's share of their inherited hoards.

[Nevrknow]

6 hours ago, RedLantern said:

I think this would largely be true, if we did away, or brought back meaningful restrictions on trusts. Perpetual institutional control of money shields it from the spendthrifts, idiots, and ne'er do wells that would otherwise eventually be sure to divest themselves of the lion's share of their inherited hoards.

That will only happen IF the people with THAT kind of $$ would agree to doing that to their families. Good luck with that.

[El Presidente]

13 hours ago, Montezüma said:

I just wanna share the current outrage caused by the new bill passed by the Netherlands government, called the Box 3 or Actual Return Act or Unrealized Gains Tax. In muggle terms this translates to paying tax on unsold (unrealized) capital gains. The prospect of this tax is ground-breaking because what the world has been accustomed to as paying on actual earnings (i.e. paying with liquid assets that a citizen has earned) is no longer sufficient. The lengths that states have gone to fulfill their agenda is bizarre. Because this tax is paying with what you allegedly possess instead of what you have truly earned. If this becomes the norm, then it becomes common practice for other states to implement.

The current Australian government tried to propose an Unrealised Gains Tax on Superannuation funds over 3 million dollars (closest in the USA is 401 and the UK the Workplace pension). 

The pushback was fierce enough for them to remove the proposal...for the time being. 

 

[RedLantern]

6 hours ago, Nevrknow said:

That will only happen IF the people with THAT kind of $$ would agree to doing that to their families. Good luck with that.

If you mean it's unlikely that those with power will willingly cede it for the betterment of society, I agree. I was under the impression we were having more of a normative discussion, rather than descriptive, however.

That aside, the fact that we're both acknowledging that wealthy people, in effect, get to decide what many laws are is pretty good evidence that those wealth taxes are needed to preserve democracy, no?

[El Presidente]

6 hours ago, RedLantern said:

The concept of wealth inequality being bad is sociological, in my opinion, not political. And when you add in the prospect of wealth inequality being largely hereditary (as in the case of a perpetual or long-term trust), it's not just a sociological issue, but it becomes somewhat of a moral issue.

I don't really believe that the general populace knows how much tax is actually paid by the top 1%/5%/10% of income earners. 

Here is a chart based on 2025. 

If you look at the US, top 10% of income earners generate over 70% of income tax. The top 1% generate 40% of TOTAL income tax. 

The UK is less but the top 1% still account for 30% of national Income tax. 

Based on these numbers, you would be hard pressed not to argue that you want to turbocharge that top 10%. You want to generate as an economy, more and more top 10% income earners. 

You want to also tell the story to the populace, of who actually generates a significant proportion of  the national income tax pie. 

 

 

 

[El Presidente]

To be fair, a chart should be shown of the % of national income earned by the top 1%/5%/10%. 

 

[rcarlson]

6 hours ago, RedLantern said:

The concept of wealth inequality being bad is sociological, in my opinion, not political. And when you add in the prospect of wealth inequality being largely hereditary (as in the case of a perpetual or long-term trust), it's not just a sociological issue, but it becomes somewhat of a moral issue.

Whose morality?  Stated differently, what do you say to someone that questions whether wealth confiscation is moral, particularly to the greatest consolidator of wealth ever conceived, the government.  

[chasy]

Those charts are interesting. For me, it's hard to look at top 10% earning ~45% of income and paying 70% of taxes and think, they should pay more. Honestly, same is true for 1%; 20% of income and 40% of taxes.

Yes there are plenty of loopholes - carried interest, long term cap gains, borrowing against assets to avoid taxes while having money.

Also, the government would blow through the additional tax from the wealthy in no time. That isn’t a long term solution. The government operates at an extreme deficit, no amount of next revenue will solve that.

I am more sympathetic to the rise of mega billionaires. It’s not the fault, but it isn’t that cool to me. I’d prefer a tighter range of wealth between the ultra rich and the rich. (More rich and fewer ultra rich).

[RedLantern]

It's curious how they define income for these charts. Your point is taken though, I'll not argue that income tax is paid into most by a small group. I'd argue that that group reaps proportionally more from the government, or at least has more to lose if the state were to fail. Regardless, the best point has been made previously - at least in the US, wealth type taxes have ideological goals, not fiscal ones.

[chasy]

4 hours ago, RedLantern said:

It's curious how they define income for these charts. Your point is taken though, I'll not argue that income tax is paid into most by a small group. I'd argue that that group reaps proportionally more from the government, or at least has more to lose if the state were to fail. Regardless, the best point has been made previously - at least in the US, wealth type taxes have ideological goals, not fiscal ones.

Yes, maybe. But there is a huge population of people in the US that will be net receivers of government support vs people who are net payers. I pay a lot in taxes and am not sure if I actually benefit disproportionately…but I agree I have more to lose if it all goes to s**t, although I'm not sure what that proves.

[RedLantern]

29 minutes ago, rcarlson said:

Whose morality?  Stated differently, what do you say to someone that questions whether wealth confiscation is moral, particularly to the greatest consolidator of wealth ever conceived, the government.  

I'd say the state of nature is best avoided. I don't really want to get into a debate about the origins of wealth as it now exists, but I'm hopeful not too many people are on-board with the idea of people who are, as a matter of birth alone, destined to be wealthy.

[El Presidente]

4 hours ago, RedLantern said:

It's curious how they define income for these charts.

 

For the charts posted above the figures generally come from OECD / World Inequality Database style comparisons. In those datasets income refers to pre-tax national income received by individuals.

 

In practical terms that usually includes:

• Wages and salaries
• Bonuses
• Self-employment income
• Business profits flowing to individuals (partnerships, S-corps etc)
• Dividends
• Interest income
• Rental income

 

So broadly speaking it is all cash income received by individuals before tax.

What is not normally included is just as important.

Typically excluded are:

• Unrealised capital gains (assets going up in value but not sold)
• Increases in property or share portfolio values
• Wealth itself (net worth)
• Often government transfers such as welfare payments depending on the specific dataset

 

Another nuance is that the US system reports more business profits as personal income because of partnerships, LLCs and S-corporations. That partly explains why US top-income shares appear higher than many other countries.

[RedLantern]

It's kind of what I assumed, so I guess I would argue that the graph underneath represents what most people would consider "making money," and the relative percentages of "money made" and taxes paid is bound to be somewhat closer. Now, people above have chimed in that taxing that money again after it has been "made" does not sit well with them, but I've always been confused about the origin of the staunch belief that money should only be taxed once as a matter of right.

[El Presidente]

4 hours ago, RedLantern said:

I'd say the state of nature is best avoided. I don't really want to get into a debate about the origins of wealth as it now exists, but I'm hopeful not too many people are on-board with the idea of people who are, as a matter of birth alone, destined to be wealthy.

Personally I am a believer that "builders/business wealth creators" should be taxed differently than "wealth inheritors."

I wouldn't want to hold back the "fast horses" in my economy as they are the state's income generators as seen in the graphs. 

[El Presidente]

7 minutes ago, RedLantern said:

but I've always been confused about the origin of the staunch belief that money should only be taxed once as a matter of right.

My 2 cents. Money should be taxed subject to the laws at the time. 

No retrospectivity.  

If you want to change laws, change them but grandfather in what you (government) has committed to in the past. Otherwise, there is no faith by income generators as to tax law in the future. 

 

[RedLantern]

I'm not in agreement with you there. Tax law changes all the time, and hasn't seemed to negatively affect incentives for people to do business to any great degree. People always make the best plans they can with the information available to them at the time. And they also hedge.

Now, that doesn't mean I think it would be fair to completely turn the tables, ex-post on people. But the devil is in the details - I'm a man of reason, not of principles.

[El Presidente]

4 hours ago, RedLantern said:

I'm not in agreement with you there. Tax law changes all the time, and hasn't seemed to negatively effect incentives for people to do business to any great degree. People always make the best plans they can with the information available to them at the time. And they also hedge.

Now, the doesn't mean I don't think it would be unfair to completely turn the tables, ex-post on people. But I'm a man of reason, not of principles.

I concur that it is a tenuous argument. 

However, I do believe that a "startup" or even a significant enterprise investing money (RISK) requires an element of certainty. 

Business/investment is hard enough. You don't need the casino/government changing the rules halfway through the game. 

[RedLantern]

The other thing I often think about on this issue, is how at the tails of the income graph, the normal incentives for decision making might start to break down. Like I understand that for 99.9% of us we would change our actions and decision making in response to things like tax, because money matters to us in a tangible, visceral sense. Having more or less of it will change our lives in material ways. But for the other folks, I have a feeling their decisions are more pathological than logical. Elon isn't going to stop being Elon because of tax reasons. And I know, the taxes that many are talking about would affect many more people than the Elon's of the world, but I think there's a fairly large group who would still be job creators, innovators, etc. due to non-pecuniary interests.

[El Presidente]

4 hours ago, RedLantern said:

The other thing I often think about on this issue, is how at the tails of the income graph, the normal incentives for decision making might start to break down. Like I understand that for 99.9% of us we would change our actions and decision making in response to things like tax, because money matters to us in a tangible, visceral sense. Having more or less of it will change our lives in material ways. But for the other folks, I have a feeling their decisions are more pathological than logical. Elon isn't going to stop being Elon because of tax reasons. And I know, the taxes that many are talking about would affect many more people than the Elon's of the world, but I think there's a fairly large group who would still be job creators, innovators, etc. due to non-pecuniary interests.

Elon and his ilk are outliers. One in Ten of a generation. They won't be too perturbed in wealth taxes. They move/relocate/restructure. They have the means. 

However the "messaging of "Wealth Tax of The Day" thought bubbles to the business/risk class is more problematic. They may not be able to move but they will pull their horns in. Less jobs created, less growth, less income generated, less tax paid. 

This is a whole of house issue for democracies/capitalist countries. I go back to my opening post where a comprehensive cross party/across industry clean whiteboard discussion would be beneficial. Making tax law state and globally consistent, incentivising ingenuity, rewarding risk takers (job creators), taxing fairly. Government needs to play its part in spending within budgets/fraud and waste elimination. A partnership that sets up for the next 100 years. 

[RedLantern]

I  guess then, to get back to your original question more clearly: 

To what extent can wealth taxes blunt the thorns of late stage capitalism? Not to any great extent. Not an effective tool for growing the middle class. Perhaps an effective tool for preserving some downward class mobility in the upper classes, but not very effective at promoting upward mobility among the lower classes (strong institutions do that). So maybe use the tax revenue from wealth taxes to bolster institutions? What institutions? What about the problem of waste and inefficiency in institutions? Plenty of waste and inefficiency in large businesses as well.

[El Presidente]

5 hours ago, RedLantern said:

Plenty of waste and inefficiency in large businesses as well.

Completely agree. However the scorecard is net profit be it reported quarterly, half yearly or annually. 

Listed companies are accountable to shareholders. Ideally . Profit is the reason for their existence. 

Plebs like me are accountable to Artie (my accountant......"WTF" are you doing Rob!), my bankers, the Tax office, myself. 

[joeypots]

Two issues.

Can we tax away deficits and social issues by only taxing the very top? Definitely not. To do it in the states would require draconian cuts in government and tax increases all and it would probably cause more problems than it would solve.

The second issue has to do with generational wealth and the rise of a self serving aristocracy. Money is speech, our SCOTUS all but says so. And recently, the feds are starting to clamp down on speech they don't like. Little things, like broadcast licences, are being threatened every day.  Like they say, "money talks". Long term we are seeing vast concentrations of unimaginable wealth that can be used to control public policy and by all accounts the concentration is getting stronger. Looking at income is only part of the issue. Net worth is, I think, a far better gauge to examine when determining public financial responsibility. 

Looking around for stats and checking them a couple of times got this from my best friend, Chat GPT.

U.S. wealth is highly concentrated and becoming more so. As of Q3 2025, the top 1% of households hold about 31.7% of total net worth, the highest level on record, while the top 0.1% alone controls roughly 14.4%. In contrast, the bottom 50% of Americans hold just 2.5% of total wealth, down from about 3.5% around 1990. The top 1% also dominate financial markets, owning roughly half of all stocks and mutual funds and about 35% of financial assets. Overall, the data shows a long-term shift toward greater concentration of wealth at the top, with relatively little improvement for the bottom half.

Capitalism works. Unfettered capitalism works really good. The US has already acted when the amount of the country's gdp was concentrated in too few hands. Standard oil was broken up into 31 companies in 1911 by the SCOTUS. The Looking past our own individual tax burden there are big issues to be addressed by preventing too few having too much control. How do we do it?

F#@!$d if I know.

[Johnny Extra]

Read my lips... No. New. Taxes.